What are FGN Savings Bonds? Step-by-Step Guide on How to Invest in Nigeria’s FGN Savings Bond (FGNSB)
Where do we find viable platforms to place idle funds in Nigeria? Where do we invest the money that we have no immediate need for? There are quite a few of them but in this article, we will be talking about the Federal Government of Nigeria’s (FGN) Savings Bond introduced on 13th March 2017, offered and managed by the Debt Management Office (DMO).
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The savings interest rate situation in the commercial banks today is extremely bad. I am not exaggerating, the highest interest rate you can get on a N10m savings deposit today in any commercial bank in Nigeria is less than 1.5% per annum. That is, you can keep N10m in your savings bank account or fixed deposit and what you get at the end of the month is just about 10,000 (vat exclusive).
Anyway, in this article, we will be explaining what FGN Savings Bonds are, how to invest or subscribe to the FGN savings bonds? Why invest in a FGN Savings Bond? How is FGN Savings Bondd different from Treasury Bills? and so on.
What is a FGN Savings Bond?
A bond, like the name implies, is simply an agreement between a borrower and a lender over a period of time.
The borrower – usually governments of countries and large corporations, also referred to as the issuers publish the terms of the bond offerings to private and public buyers (who are called subscribers), and receive the funds through their appointed brokers.
At the agreed due time, the issuer returns the invested principal to the subscriber of the bond with their agreed interest.
Nigeria’s FGN Bonds are instruments issued by the Government of Nigeria through the Debt Management Office (DMO) with a guaranteed interest plus principal quarterly repayment at the end of the tenure of the bond.
FGN bonds are mostly issued when the Government of Nigeria needs money to facilitate projects, pay back external loans, encourage public savings culture, and so on
Why Invest in FGN Savings Bond?
The FGN Savings Bond has a lot of benefits over any other kind of savings deposit investment in Nigeria at the moment. Here are a few of the very important benefits of investing in the FGN Savings Bond:
- FGN savings bond is 100% safe guaranteed, and foolproof. The reason is that the Federal Government of Nigeria cannot get so broke to the extent that they won’t be able to pay back your money.
- Your quarterly interest hits your preferred bank account directly without automatically
- Unlike in commercial banks, you can invest as little as N5,000 in the FGN Savings Bond and still earn good interest on it
- You can use your FGN Savings Bond certificate to get a loan from any bank.
- You can use FGN Savings Bond to lock idle funds away
- You don’t get charged for ANYTHING (not even VAT/WHT)
- FGN Savings Bond interests are actually better than bank interest rates currently
How to Subscribe To or Buy the FGN Bond?
The process of buying or subscribing to the FG Savings Bond is simple. Here’s a simple steep-by-steep guideline on how to buy the FGN Savings Bond:
- Contact a SEC-approved stockbroker
- You will be required to fill this FGN SAVINGS BOND FORM
- Once you’re done, submit the form to your stockbroker
- Place the fund in the account advised by your stockbroker
- Your stockbroker will process the form and open a CSCS account for you
- Ask for your certificate after the fund is successfully placed
Frequently Asked Questions on FGN Bond (2022)
What is the minimum amount I can invest in FG Savings Bond?
N5,000
What is the maximum amount I can invest in FG Savings Bond?
N50,000,000
What if I have more than N50,000,000 to invest?
Subscriber can invest multiple times
What are FGN Bond rates/prices?
Current rate is around 8-9% p.a (August 2022)
What is the tenor for an FGNSB investment?
Tenor: 2-3 years
Can I sell my investment before maturity?
Yes, you can sell your maturity before the maturity date. Just notify your stockbroker.
When can I invest in the FGN Savings Bond?
The bond is issued monthly. Notify your stockbroker of your intention to invest and they will advise the due dates.
Is FGN Savings Bond different from Treasury Bills?
Yes, the FGNSB is very different from the treasury bills. Here are a feww distinctions between them:
- FGN Savings Bonds are sold in the stock market, not just through banks and stockbrokers
- FGN Savings Bonds has a longer tenor (2-3 years), the highest duration for a treasury bill is 364 days
- FGN Savings Bonds interest rates are determined by DMO, treasury bills are bidded for and the rates are determined by market forces – making it more volatile
- FGN Savings Bonds interests are paid quarterly, while interests (coupons) for treasury bills are paid upfront.
Conclusion
Having explained what the FGN Savings Bonds are and how to subscribe to them, you can now sit with your financial advisor and discuss your prospects with them. Why you still need an advisor is to advise you if the tenor, interest rate, other features, etc will work for you personally.
For instance, while the FGN Savings Bond favours long term investors, anyone who needs to use their money every now and then should stay away from long term investments like this one.
Information contained on this article are just that – a piece of information. You should not use this to make financial decisions and we highly recommended you seek professional advice from an authorized expert.
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